How Do I Appeal My Appraisal Assessment?

You’ve invested time and effort in your search for a new home. You’ve researched neighborhoods, and you’ve thought about the features in a house that are important to you.

Finally, you’ve found the perfect home. You’ve even negotiated a purchase price with the seller.

You’re waiting for your mortgage approval to conclude the sale. To your chagrin, the appraisal undervalues your prospective house. Your lender will not approve the mortgage loan since the appraisal does not support your purchase price.

How can you appeal the mortgage appraisal?

Contact your lender

The first step in appealing the appraisal is to contact your lender and find out the steps of their appeals process. Find out if your appraisal was done by an appraiser or by an automated valuation model.

The automated, electronic appraisal method speeds up the appraisal process and reduces costs—but can produce faulty results. If there was an electronic appraisal, the lender should allow another appraisal by a certified appraiser. The lender may require you to pay for this appraisal.

Study your appraisal carefully

If the appraisal was done by an appraiser, you must provide proof of the appraiser’s error.

Study the report carefully. There may be simple factual errors that reduce the value of the house. The appraiser may have mistakenly marked three bedrooms instead of four.

A simple error could be the basis of the low mortgage appraisal. Politely point out the error to the appraiser, who should then be willing to change the oversight.

Research the comps listed in the appraisal

Note the comparables (comps) listed by the appraiser. These comps are similar houses in the same neighborhood that were sold within the last six months. The appraiser uses the sale price of these homes to help determine the market price of your prospective home.

Note any advantages that your house has over the comps. Perhaps your house is on a larger lot, has a bigger kitchen or was recently renovated. These advantages should prove that your prospective house has a higher market value than the comps. Take pictures of the larger lot and the comps’ smaller grounds to further document your point.

Research other home sales that took place within the last six months, in your prospective neighborhood. You may discover other homes that were sold at prices above the comps listed by the appraiser. These new comps will help support your claim that your house is worth more than the appraiser’s value.

Present your information to your lender who will forward it to the appraiser. Your detective work and careful documentation will help the appraiser reassess his valuation.

Updated from an earlier version by Dini Harris.

7 Warning Signs of a Bad Loan

The old joke: the greatest trick the devil ever pulled was convincing the world he didn’t exist.

The sad truth: the greatest trick a lender could ever pull is pretending your best interests are at heart while laughing all the way to the bank after giving you a bad loan.

When you go to shop for a loan, look for these bad loan warning signs—and be prepared to run—not walk—away from the table, from any lender who does the following dubious actions.

1. Says It’s Okay to Fudge Some Numbers

If your lender is trying to get you to lie about your income in order to get a bigger loan, stop dealing with that lender immediately.

There is no such thing as a little white lie when borrowing money: it’s mortgage fraud, and it could get you slapped with steep penalties or even jailed.

2. Pressures You into a Bigger Loan

Beware of any lender who pressures you into borrowing more money than you need.

You will likely pay more in interest on the extra cash than you’d earn in interest by stashing it away in a savings account.

Stick to what you need, no more.

3. Doesn’t Consider Your Monthly Income

Figure out whether you have enough coming in to cover all your monthly bills, a new mortgage and a savings account for emergencies.

Know that number and stick to it—if a lender starts pressuring you into a bad loan with monthly payments you know you can’t afford, get out.

If your outflow is more than your inflow, you will find yourself in trouble rather quickly.

4. Doesn’t Disclose Documents

Beware of any lender who fails to provide you with the required loan disclosures or tells you don’t need to read them.

By law, lenders have to tell you the annual percentage rate (APR) plus provide a good faith estimate (GFE)—an itemized list of estimated closing costs—within three days after you apply.

The APR includes not just the interest rate, but also points, broker fees and certain other credit charges. The GFE covers these charges as well as everything else you’ll be asked to pay at settlement.

You should use these documents to loan shop.

5. Promises One Thing, Delivers Another

If you are presented one set of terms when you apply for the loan and a different set at closing, you should demand an explanation.

It could be a bait-and-switch scam, where the lender is trying to pressure you into signing these new documents with worse rates or unfavorable terms.

Be prepared to walk away and take your business elsewhere.

6. Says It’s Okay to Leave or Sign Blank Forms

It is never okay to sign a blank form, period. If you leave blanks, a scamming lender could fill in extra terms and conditions that could alter your loan—and not for the better.

Worst-case scenarios could have lenders who write in clauses surrendering the title of your home.

Don’t let anyone fill in the blanks later. If there is a blank, cross it out and initial your mark.

7. Doesn’t Provide Copies

Lenders may not give you the actual filled-in papers in advance, but they should give you blank documents so you can take them home to review or show them to a trusted advisor.

If they won’t, maybe they have something to hide.

If the lender won’t give you copies of what you’ve signed at closing, cancel the deal right then and there.

These papers contain important information about your rights and obligations, and you need them.

Always Ask Questions or You Could Get a Bad Loan

When there’s something you don’t understand while shopping for a mortgage, consult with someone you trust for an explanation.

That could be an attorney, financial advisor or your local credit counseling agency.

Updated from an earlier version by Lew Sichelman.

3 Credit Card Strategies That Could Help You Buy a Home

Your ability to buy a home with a mortgage depends on how much net income you have after all monthly debts. If your debt payments absorb your income—particularly credit card payments—you may have to put the brakes on the mortgage application.

Most home buyers realize in order to purchase a home, they need at least good credit—and a better credit score means a better chance of qualifying.

One of the ways to build and maintain a healthy credit score is the ability to use and manage credit over a period of time. Using three to five credit cards actively and paying them off in full each month is a fantastic way to support a good credit score, a benchmark factor in qualifying for the prize.

However, credit cards are not something to be taken lightly, and you should exercise caution with them—especially if they are not paid off in full every month.

When it comes to qualifying for a mortgage, it’s not what you owe in total that counts—it’s what you pay each month. Most lenders allow a maximum debt-to-income ratio of approximately 45%, meaning they allow up to 45% of your monthly pretax income for a proposed new mortgage payment and any other debts.

Let’s take a look at the various credit card scenarios and what you can do to help your chances of qualifying for a mortgage.

1. Spreading Out Your Debt

When it comes to getting a mortgage, the key with carrying a balance on any one credit card is the monthly payment. In most circumstances, the larger the balance on any one credit card, the larger the monthly payment. The higher the monthly payment on any individual card, the more likely you will not be able to purchase as much house.

(You can see how much house you can afford here.)

Let’s say you owe $10,000 on a credit card, and the monthly payment associated with the obligation is $200 per month. To maintain your ability to qualify, a lender would require $400 per month of additional income to offset that debt.

However, if this balance could be spread out over two or three credit cards with lower interest rates that would result in lower payments totaling less than $200 per month, you come out ahead.

2. Credit Card Payoff

If you’re looking to attack your credit card debt and pay it down (you can use the credit card payoff calculator to see how long it will take you) in preparation for qualifying for a mortgage, you might wonder which of your cards you should target.

If you’re trying to buy a home, paying off the higher-rate credit cards first might be a good move if the monthly payment is higher than the cards you have that are 0%. In other words, for buying a house, you’ll want to pay down the cards that have the highest monthly payment regardless of the interest rate—because those are the ones that will affect your qualifying ability the most.

So which card should you focus on paying down? Let’s say you have a 0% interest credit card with a $2,000 balance and a $150 monthly payment. You also have a 6% interest credit card with a $5,000 balance and a $50 monthly payment. You’ll get a bigger bang for your buck paying off the credit card with the higher payment despite the fact that it’s 0%.

The idea here is that you’ll want to cherry-pick the cards with the higher monthly payment in order of priority to maximize your buying potential. A good mortgage lender can assist you tremendously with this task.

*As a good rule of thumb for financial planning, it does make sense to tackle the higher interest rate credit cards first because of the additional interest expense you’ll pay over time, but that is not necessarily the case when it comes time to qualify for a mortgage.

3. Consolidating Your Cards

Let’s face it, people carry credit card debt because they don’t have the cash to make the purchase outright. Consolidating any 0% interest credit cards or even other credit cards into one credit account containing a total new lower payment can help you qualify to buy a home.

Why? It has to do specifically with the minimum monthly payment. Even if you choose to make a pre-payment each month in an effort to accelerate the debt payoff, it’s about the minimum obligation per credit card the lender will use in determining whether or not you’ll be able to buy that house—so consolidating may help.

If you have the cash, or are trying to decide whether to use the cash for the down payment or paying off debt, talk to a lender. If you do plan to pay off the credit cards to qualify, this can be accomplished as a special lender exception (not all lenders allow paying off debt to qualify).

For example, if you’re in contract to buy a home and your loan gets rejected by the underwriter because your debt-to-income ratio is too high, one way to reduce the ratio to get your loan approved is to pay off your credit card balances in full. This route entails one additional step in order to remove the obligation: You would have to pay off the credit card in full and close the credit account.

In most cases, closing credit card accounts can adversely affect your credit score. However, a new mortgage loan in your name—paid on time every month—can also be instrumental in building a good credit rating. You can find out how your debts affect your credit scores by checking them for free on Credit.com.

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This story was written by Scott Sheldon and originally appeared on Credit.com.

10 maintenance tips for first-time homeowners

If you’re first-time homeowner, you’ll probably experience some trial and error before you know how to properly care for your new place. But you can avoid some costly mistakes by doing routine home maintenance that protects your investment. Here’s a basic home-maintenance checklist to help you get started.

1. Check gutters regularly to make sure they’re properly attached and clear of sticks and leaves. Also confirm the flow of water from your gutters is away from your home to avoid damage to your foundation.
2. Test your smoke and carbon monoxide detectors monthly. Experts also recommend changing the batteries in these items as part of your routine when you change the clocks in the fall and spring.
3. Change filters in your home at intervals recommended by your HVAC manufacturer, especially if you have allergies or pets. A dirty filter means an inefficient system. Also arrange for seasonal checks on your heating and cooling system to avoid emergency repairs.
4. Hire a tree-service company to inspect trees on your property. They can give you advice on how to care for your trees and identify weak limbs that should be cut before a storm.
5. Is your toilet running? Or your faucets? No, this isn’t a joke. Toilets that run and faucets that leak when not in use are wasting your water. Sometimes you can fix these problems yourself, but hire an expert if you’re in doubt.
6. Frequently check the water supply hose to your washing machine, which can leak and cause expensive damage.
7. Clean your dryer vent regularly. Note the dryer vent is not the lint trap (which should be cleaned often, too). Dryer vents push air outside the property through a duct, but can get filled with lint. Clogged dryer vents can be a fire hazard.
8. Clean around the vents and coils underneath and behind your refrigerator to support its efficiency. Also check for gaps when it’s closed to make sure your cool air isn’t being wasted.
9. Check your doors, garage door, windows, and any places where pipes and wires enter the structure for gaps and cracks. Replace weather-stripping that’s missing or in disrepair and add caulk where needed. This will help you keep the house insulated for all seasons and keep bugs and small creatures out.
10. Have a pest-control expert inspect your home, even if you don’t suspect signs of infestation, since attic and crawlspace critters are usually unwanted guests on your property.

As you can see, a lot of effort goes into maintaining your home, and these tips just scratch the surface. Ask your Texas REALTOR® about other resources that can help you keep your home safe, efficient, and well-maintained.

Why Isn’t Your Home Selling?

If the listing for your home hasn’t been attracting buyers for a few weeks in a fast-paced real estate market, or for a few months in a slower one, you certainly have good reason to be worried.

A home doesn’t sell due to a variety of factors, some of which you can control and some of which you can’t.

Let’s start with the things you can control, which also happen to be the most important elements of any home’s appeal to buyers: price and condition.

Price Your Home Right, From the Start

A good REALTOR® will help you determine the correct price for your home based on a thorough comparative market analysis (CMA). The reason it’s so important to price your home appropriately from the beginning is that a home that’s priced too high will languish on the market without any offers.

Even if you lower the price later, you will have lost the momentum of the initial listing period and buyers will assume there’s something wrong with the home. Eventually you may sell it, but more than likely the final sales price will be lower than your correct initial price would have been. Price your home too low and you have lost out on potential profit.

Your price should be based on current local market conditions, not on what you need to pay off your mortgage, what your neighbor sold her place for a year ago, nor your guesstimate of what your home is worth. Your REALTOR®’s CMA will look at recent sales, homes that didn’t sell and were pulled off the market, and current listings to guide your price decision.

Condition of Your Home

Regardless of your local market conditions, buyers have high expectations for your home, beginning with the exterior. While you don’t necessarily have to spend a lot of money, you do need to raise the level of your home’s curb appeal with some sweat equity. Pull weeds, trim the grass, plant a few flowers and perhaps paint your front door to make sure prospective buyers don’t decide to drive away.

Inside, your home needs to be consistently clean, neat, decluttered and depersonalized so that buyers can visualize themselves living there. Your REALTOR® should be able to suggest ways to  prepare your home for a sale, which, by the way, is nothing like the way you live in it. Your kitchen counters should be cleared, your bed always made and your dishes always put away in case a buyer wants to visit.

Marketing Your Home

When you choose a REALTOR®  to list your home, make sure you ask about photos and a marketing plan. The majority of buyers look online first at properties so it’s crucial that your home has multiple professional-quality photos that make it look as enticing as possible, and that your home appears on multiple websites so buyers can see it. A listing without a photo or with one badly lit photo isn’t likely to generate many offers.

Make Your Home Available

One of the more challenging aspects of listing your home for sale is that you must make it available to buyers as easily as possible. Buyers prefer to see a home without the owner there, so make sure there’s a lockbox at your property and that you allow nearly unlimited access to prospective buyers.

Overcome Challenges

Sometimes market conditions or a specific flaw in your home make it tougher to sell as quickly as you would like. Your REALTOR® can help you evaluate the market and let you know if you need to offer particular incentives, such as closing-cost help. If your home has an awkward floorplan or is located on a busy street, you and your REALTOR® can come up with ways to emphasize its positive aspects and deemphasize any negative aspects, such as by staging the backyard or highlighting the renovated kitchen.

The Fastest Way to Get Pre-Approved

Getting pre-approved for a loan can make the whole home-buying experience go smoother.

When you’re pre-approved, REALTORS® are more likely to want you as a customer, sellers are more likely to accept your offer, and—by knowing what you can afford—you’ll know what homes to look at.

And it doesn’t have to be a hassle either. With these easy tips, you can get a pre-approval without ever leaving your sofa.

Get Your “Pre-Approved” Facts Straight

Applying for a pre-approval doesn’t require nearly as much paperwork as applying for a mortgage, but you’ll still need to be as accurate as possible if you want to make sure you’re getting the best deal—and the most offers.

Start by gathering the information you’ll need:

• Estimated purchase cost. If you have a home in mind, look up the seller’s asking price to get an idea of how much you’d need to borrow.
• Down payment amount. Knowing how much you can put down will have a big effect on your pre-approval.
• Personal information. You’ll need basic info like Social Security numbers and driver’s license numbers for anyone on the application.
• Proof of income. Gather recent paystubs, tax returns and paperwork from your employer.
• Proof of assets. Gather bank statements, retirement accounts, CDs and other documents showing your assets.

Estimate Your Credit Score

While any prospective lender will pull your credit score, you’ll also be asked to estimate your credit score on your application.

To make things easier, you can order a copy of your credit scores for a small fee from one the three credit bureaus—Equifax, TransUnion and Experian—before you apply for a pre-approved loan. By law, you’re entitled to one free credit history report a year fromeach of the credit bureaus.

You can also use your credit report to make an educated guess about your credit scores. For example, if you have low-to-no debts, active credit lines and a history of timely payments, you probably fall in the “good” credit score range.

Apply Online

Once you have your information and credit scores together, you have two options to apply for a pre-approved loan. If you have a particular lender in mind, you can visit the lender’s direct website to see if you can apply online.

Many lenders have this feature, but you’ll have to fill out an application for every lender you want to use.

If you want to go the faster route, try a pre-approval service like the one featured on therealtor.com® individual listings page. By checking the box that says, “I want to get pre-approved by a lender”, you’ll be connected with up to three lenders right away.

Staying Safe

Before you apply online, read through the company’s privacy settings. Look for companies who state this information:

• Clearly list how your personal information will be used
• Explains their pre-approval process
• Guarantees not to sell your personal information to third-party companies or vendors

Knowing what you can expect while getting pre-approved will keep your identity safe.

4 Tips for Selling Your Home in Fall

A crisp chill in the air, the turning of leaves and the scent of pumpkin spice are all hallmarks of fall.

There’s no doubt it’s a beautiful season, and if you’re planning on selling your home by the end of the year, you can capitalize on all the good work nature already provides for us.

Accentuate the Positives When Selling Your Home

You want your home to stand out when you put it on the market, so start at the curb.

To play up the fall feel outside of your home, clean up flower beds and rake any leaves off your lawn—the first thing buyers should notice is the changing colors on your trees, not the muddled dead leaves on the grass.

Add a wreath of seasonal plants on the front door for a finishing touch.

In the backyard, store away any summer items like pool floats, inflatable water slides and tiki torches. Add fall-related decor like a self-contained fire pit and warm-colored cushions on your patio furniture to create an outdoor space perfect for chilly evenings.

You can also add a pumpkin to the front stoop, but don’t carve it up because it will spoil much faster.

Remember to avoid using a pumpkin altogether if the weather is bitterly cold already, as it will rot faster—that will only attract flies.

Bring the Colors Indoors

Autumn’s natural color scheme is warm and earthy, reminiscent of cozy, fireside nights.

To bring some of that warmth inside for your open house, fill vases with red, orange and deep yellow flowers like marigolds, Mexican sunflowers or strawflowers. Place vases in the entryway, in the master bedroom and on top of mantles to add color throughout the house.

To make your home feel cozy and inviting, invest in throw blankets or pillows in the same shades as your floral arrangements. Place the pieces around your living room and bedroom to draw out the fall colors.

Add dried decorations, like dried wheat or dried cornstalks, to fill in empty wall spaces with that fall feeling.

Use Favorite Fall Foods

The pleasant scent of fresh-baked cookies or a warm apple pie wafting through the house can trigger memories of comfort and home.

To tie in with the season—and the much-beloved holiday foods—light some candles scented with apple spice, pumpkin spice, cinnamon, cranberries or ginger spice.

Add warmth and a touch of the holidays to your kitchen or dining room by creating a cornucopia centerpiece on your table or countertop. Fill the centerpiece with gourds, miniature pumpkins and maize to help potential buyers picture themselves cooking their first Thanksgiving dinner in their new home.

Don’t Overwhelm

While adding a bit of color and warmth will help buyers picture holidays ahead, keep your decorations clean and minimal.

Avoid overpowering a room with too many flowers and candles, and always remember keep personal items tucked away.

Even if the piece is holiday or fall themed, buyers like to picture their own decorations in a home.

Plan for Property Taxes the Right Way

Knowing what to expect from property taxes, and what tax relief you can use, is an essential part of budgeting for home buying.

The last thing you want is to be caught off-guard by a large tax bill you aren’t in a position to pay.

What are Property Taxes?

Property taxes vary by area and are used to pay for local government things like education, emergency workers and libraries.

Property taxes are determined by the overall market value of your home—not the price that you bought it for.

How Are Property Taxes Assessed?

This home value assessment is determined by a tax assessor, either when the property is sold or renovated—or according to a fixed assessment schedule.

If you think your property assessment is too high, you have the right to appeal it.

Budgeting with Escrow 

Some loans, like Federal Housing Administration (FHA) loans and high-risk loans, require an escrow account.

Escrow accounts work like a forced savings account. The lender estimates the annual costs of property taxes and insurance. Each month, you pay a portion (one-twelfth) of that cost into the account.

By doing so, you won’t have to pay a lump sum of property taxes and insurance at the end of the year. For lenders, an escrow account cuts down on the risk of foreclosure due to bad budgeting by the homeowner. Escrow accounts can also be optional.

Escrow accounts can be very useful for people who aren’t very good at budgets. They also lessen the brunt of end-of-year costs. However, if you’re good at saving and like to micro-manage your own finances, an escrow account might just get in the way.

If you do have an escrow account, check your transactions to ensure your lender is paying your taxes and other expenditures by the due date.

Tax Deductions and Relief

Many states offer various forms of property tax relief.

• The homestead exemption: This is where a percentage of your home’s assessed value is excluded from taxes. The homestead exemption varies by state. Some states offer it with a cap on the amount of money you can be exempt from while some states do not. Other states may require the homeowner to qualify under other criteria, such as age or income, to be eligible for the benefit.

• Tax rate caps: This is the maximum amount that you will have to pay in tax. Not all states have one.

• Property tax deferral: This allows some homeowners—such as seniors, those with disabilities or those with low income—to delay paying property taxes. Keep in mind additional costs like filing fees and accumulated interest on the delayed tax can be incurred.

• Relief for military veterans: These tax relief programs also vary by state, although they often apply to veterans who were honorably discharged or have served during wartime. Check with your Veterans Affairs office to see what you qualify for in your area.

• Energy tax relief: Homeowners who make eco-friendly renovations may be eligible for property tax breaks.

Planning for Property Taxes

You should find out more information about your county’s property taxes from your local assessor’s office or your town’s website.

Remember, tax exemptions can vary by state, so don’t bank on not paying for something unless you personally verify it.

Key budgeting tips to remember include what the likely assessment value of your home will be, when the next assessment will occur, and whether you qualify for any tax relief.

Updated from an earlier version by Ben Apple.

The 8 Mortgage Mistakes You Can’t Afford to Make

Picking out the perfect home can be a challenging task. But that’s only the first step.

You still need to be an attractive loan candidate, navigate the mortgage processand plan well for the future.

Since all that can get a little tricky, many home buyers made mortgage mistakes that cost them dearly.

In order to avoid some of the biggest missteps, you should first know what they are.

1. Picking Any Old Mortgage

You don’t want to be saddled for even a short period of time with the wrong mortgage.

Investigate all of your options, and then you need to lay your choices side-by-side and do the math—making sure you have an emergency savings for worst-case scenarios.

Loan shop with several different lenders and use the realtor.com® mortgage calculator to fine-tune your estimates.

2. Confusing Pre-Approval or Pre-Qualification With Commitment  

When you’re pre-qualified, the lender is simply giving you an estimate about how much you can borrow based on information you’ve provided.

When you’re pre-approved, the lender has verified everything you’ve provided and is offering to lend you up to a given amount at current interest rates—under certain conditions.

It’s much better to be pre-approved when shopping for a home, but it’s still not a guarantee: the lender’s final clearance and a loan commitment are subject to an appraisalsatisfactory to the lender, a good title, a last-minute credit check and other verifications.

3. Having Too Much Debt

Even if you pay your bills on time, lenders tend to focus just as much on how much credit you have available to you—that is, your debt-to-income ratio—as they do on timeliness.

Being up to your ears in debt is a sure way to be turned down for a mortgage. Postpone any big-ticket purchases until after you buy your house.

4. Forgetting About Your Credit

Before you apply for a loan, you should know your credit score and credit report inside and out.

Thoroughly check your credit report for any possible mistakes. You can order a free credit report from each of the big three credit report agencies—Equifax, TransUnion and Experian—once a year.

If you see a mistake, dispute it. If your credit is bad, that’s okay: just work on repairing itbefore you apply for a mortgage.

5. Lying on Your Loan Application

Exaggerating your income on a mortgage application or putting down other untruths can be a federal offense.

If a lender finds out, they can make your loan due and payable. And while bad loanofficers may stretch the truth to get a client approved, it’s the borrowers who end up paying the price.

6. Hiding From Payments

The worst thing you can do is ignore phone calls and letters from your lender when you are behind on your payments.

Lenders have many options at their disposal to help keep borrowers from losing their homes to foreclosure, but they can’t do anything for you unless they can talk to you about your difficulties.

7. Skipping a Home Inspection

Failing to make your purchase contingent on a satisfactory home inspection could be a costly mistake.

Good home inspectors examine houses from stem to stern. They’ll be able to tell you whether the roof or basement leaks, whether the mechanical systems are in good shape and how long the appliances should last.

Don’t get caught off guard by needed repairs, or it will mean more money for your mortgage payments.

If you’re unsure of where to find a good home inspector, ask a REALTOR® for a referral. 

8. Making Big Life Changes

Lenders like stability.

It’s a good idea to have kept your job for at least a year or two before applying for a mortgage, and it’s even more important to keep your job throughout the mortgage process.

If you’re looking to switch jobs, wait until after you’ve closed the deal.

Updated from an earlier version by Lew Sichelman.